Retailers account for the largest trade sector in every economy in the world. There are significantly more retail outlets than there are wholesale depots or manufacturers. This large distribution makes the retail world very competitive. To outsmart competitors, outlets have employed loyalty to build customer relationships for decades. However, with so many retailers already offering loyalty programs and customers seeking improved programs that provide transparency and true importance, traditional loyalty programs seem to be fading out.
Thanks to blockchain technology, we may just be at the threshold of reinvention in retail loyalty programs. The interesting truth about blockchain-inspired loyalty programs is that they benefit retailers and consumers. In this article, we’ll discuss how this happens.
What’s the problem with conventional loyalty programs
At this point in life, you have likely come across more loyalty offers than you can count. From coffee shops and grocery outlets to online platforms, they are everywhere. Loyalty programs are expected to make customers happy, but most customers feel frustrated or indifferent at best. Why is this?
Many of these programs are not transparent and do not offer real value to the customer. For example, a grocery brand can award points to a customer that they can only use for a specific type of grocery they don’t need frequently. This is not to mention that these points cannot be used in another grocery line, and they often expire too quickly. For brands that escape these loopholes, there may be too many processes before one can redeem the points.
Retailers also face their own fair share of problems. With inflation and other economic variables, retailers face rising operational costs, which challenge the profitability of loyalty programs. Also, loyalty programs often require customers to provide their personal information. This adds data security to the already cumbersome tasks of the retailer. There’s also the inability of these programs to function via cross-platform integration.
In summary, these problems present a gap between what customers want and what retailers can offer. Let’s see how blockchain technology can close the gap.
Why should retailers care about blockchain technology?
First, what is blockchain technology? Let’s spare the technical jargon. It is simply technology that relies on a decentralized ledger to ensure secure and transparent transactions. Every transaction is verified by a network of interconnected nodes, which makes it impossible to manipulate data. Beyond solving problems such as payment scams and delays during international transactions, blockchain technology presents solutions for retailers seeking improved loyalty programs.
How blockchain loyalty programs work
The fundamental principles may resemble traditional loyalty programs, but the mechanisms differ. Here are some methods they offer.
Tokenized points
Unlike in traditional settings where loyalty tokens are useless across other platforms, digital tokens such as cryptocurrency can be collected and stored in a safe digital wallet. These tokens can be stored and used to make purchases elsewhere.
Smart contracts
With blockchain technology, retailers can instantly reward customers without human effort, thanks to smart contracts. These self-executing smart contracts automate rewards and redemption, which reduces human drudgery and ensures faster redemption processes for customers.
Usability across other platforms
Customers can often use loyalty points at various retail outlets that share a loyalty network. For instance, when customers earn LoyalCoins in the Philippines, they can shop with them in outlets that differ from the one where they earned the coins.
Real-time transparency
Blockchain technology makes it easy and fast to track transactions. This can improve trust and efficiency because customers and retailers can immediately access transaction status.
How this can work in the digital casino industry
Although it is not a mainstream reality, blockchain-based loyalty rewards can positively improve customer-platform relationships with online casino platforms. Players can earn tokenized points when they play games, make a deposit, refer a new customer or participate in events. These points could later be converted into in-game bonuses, exchanged for cryptocurrencies or used at other online casinos that share the same token network. There’s also the advantage of real-time redemption and instant payouts where smart contracts automate rewards such as spins, manual approvals and payouts.
What are the gains?
Reduction in operational costs is one vital point for retailers. With smart contracts, automated loyalty processes reduce the number of overheads and errors. It can also improve customer engagement due to the flexibility of blockchain transactions. With blockchain-based loyalty programs, retail brands can easily partner with non-competitive brands to create more value for their customers.
For customers, the gains include the ability to use loyalty points across different platforms, instant redemption, transparency in points generation and usage and increased data security.
Final words
Traditional loyalty programs are getting more frustrating by the day. Lack of transparency, too many redemption criteria and inoperability across different brands account for the major reasons for this. However, blockchain-based loyalty programs attempt to meet these challenges with solutions. Thanks to smart contracts and decentralized tokens, retailers can reward loyal customers with points and gifts that are truly valuable and can be used with other retailers.